Canada Departure Tax (Exit Tax): How It's Calculated

Canada’s departure tax, also called the exit tax, isn’t a separate levy. When you stop being a Canadian resident, ITA 128.1(4)(b) treats you as having sold most of what you own at fair market value, and half of each resulting gain is taxable on your departure-year return. Canadian real estate, registered accounts and pensions are left out. It’s one step in leaving Canada for tax purposes, and the estimator further down puts a rough number on your own holdings.

What is Canada’s departure tax?

It’s the income tax on a deemed sale. Under section 128.1(4)(b) of the Income Tax Act, when you cease to be resident you’re deemed to have disposed of each property you own for proceeds equal to its fair market value, and paragraph (c) says you reacquire it at that same amount. Any gain lands on the return for the year you leave. The CRA describes the same rule as a deemed disposition, “also known as departure tax”.

“When you leave Canada, you are considered to have sold certain types of property (even if you have not sold them) at their fair market value (FMV) and to have immediately reacquired them for the same amount. This is called a deemed disposition and you may have to report a capital gain (also known as departure tax).” (CRA, Leaving Canada (emigrants))

The trigger is the date your Canadian residence ends, which isn’t always the day you fly. The CRA says you usually become a non-resident on the latest of three dates: the day you leave Canada, the day your spouse or common-law partner and dependants leave, and the day you become a resident of the country you settle in. If you’re going back to a country you lived in before Canada, it usually uses the day you leave instead. Pinning that date comes first, because every value on the list is measured on it. The order the residency tests run in covers how to pin it.

“Exit tax” is the phrase most people search, and it means the same thing here. The United States has its own exit tax for people who give up citizenship or a long-term green card, which is a different regime with different rules.

What property is exempt from departure tax?

Four kinds of property are left out of the deemed sale for most individuals. Subparagraph (b)(i) excludes real or immovable property situated in Canada. Subparagraph (b)(ii) excludes property of a business you carry on through a permanent establishment in Canada. Subparagraph (b)(iii) excludes an “excluded right or interest”, a defined list that includes your RRSP, RRIF, TFSA, RESP, RDSP, FHSA, pensions and annuities. Subparagraph (b)(iv) protects short-term residents.

That last rule applies if you’re not a trust and weren’t resident in Canada for more than 60 months in the 120 months ending when you leave. It shields property you owned when you last became resident, and property you inherited afterward. Anything you bought after you arrived is still caught. There’s also a fifth carve-out, (b)(v), for property covered by an election you can only make when you come back to Canada.

Everything else is deemed sold: shares and funds in a non-registered account, crypto, private company shares, real estate outside Canada, foreign-currency deposits, and personal belongings. The CRA’s own list of examples is shares, jewellery, paintings and collections. Whether an item is deemed sold and whether it goes on the T1161 list are two separate tests, and the table runs both.

Property you own on the day you leave	Deemed sold?	Counts toward the T1161?
Shares, ETFs, mutual funds in a non-registered account	Yes	Yes
Crypto, private company shares, foreign real estate	Yes	Yes
Canadian real estate	No, 128.1(4)(b)(i)	Yes, it isn’t on the reportable-property exclusion list
Business property used through a Canadian permanent establishment	No, (b)(ii)	Yes
RRSP, RRIF, TFSA, RESP, RDSP, FHSA, pension, RCA	No, excluded right or interest	No
Employee security options under a section 7(1) agreement	No, excluded right or interest, paragraph (c)	Yes, because the T1161 test reads the list without paragraph (c)
Canadian-dollar cash and bank deposits	No gain arises	No, money that’s legal tender in Canada is excluded
Cash and deposits in US dollars or another foreign currency	Yes, it’s property not on the exclusion list	Yes, the cash exclusion covers only Canadian legal tender
A personal-use item worth less than $10,000	Yes, though ITA 46(1) floors its cost and proceeds at $1,000	No
Property you brought to Canada, if you were resident 60 months or less in the last 120	No, (b)(iv)	Only if it’s taxable Canadian property

The T1161 column comes from the definition of “reportable property” in ITA 128.1(10). The CRA’s page shortens the cash line to “cash (including bank deposits)”, but the statute’s exclusion is “money that is legal tender in Canada and deposits of such money”, so a US-dollar account doesn’t get the same pass. What departure tax catches, subparagraph by subparagraph goes deeper on each exclusion.

How is Canada’s departure tax calculated?

Property by property, then added to your other income for the year. For each item that’s deemed sold, subtract its adjusted cost base from its fair market value on your departure date. Net the gains against the losses. Half of the net gain is a taxable capital gain under ITA 38(a), and half of a loss is an allowable capital loss under 38(b). The taxable half is taxed at whatever federal and provincial rates your income reaches that year.

1. Value each property on the departure date. Fair market value at that moment, in Canadian dollars. Private company shares and real estate outside Canada usually need a valuation.
2. Subtract the adjusted cost base. The result is a capital gain or a capital loss for each item.
3. Net losses against gains, with one exception. A loss on personal-use property, such as a car or furniture, is nil under ITA 40(2)(g)(iii), other than listed personal property. Gains on those items still count.
4. Take half. ITA 38(a) sets the taxable portion at one-half. That’s the rate in the consolidated Act as it stands in October 2026, and the CRA’s capital gains page also refers to “the 1/2 inclusion rate”.
5. Report it on the departure-year return. The CRA says to work the deemed dispositions on Form T1243 and carry the gains and losses to Schedule 3. The taxable half then sits on top of your salary and other income for the part of the year you were resident.

There’s no flat departure tax rate. The same $100,000 gain costs very different amounts depending on what else you earned that year and which province you left. The step that most often changes the answer isn’t the arithmetic: it’s which items are deemed sold at all, so get the table above right before you value anything. If a holding has already dropped since you left, what happens when departure-tax property falls in value covers the loss side.

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It applies your marginal rates to the whole taxable gain, so a gain that spans brackets will come out a little high. It doesn’t apply the 60-month rule for property you brought to Canada, so leave those rows out yourself. A car, boat, furniture, jewellery or art goes on a personal-use row, which applies the $1,000 floor, ignores a loss and counts the item toward the T1161 only at $10,000 or more. (A loss on jewellery or art can offset gains on the same kind of property under ITA 41(2), which the estimator leaves out.) US-dollar or other foreign-currency cash goes on the shares-and-other-property row, because the cash option is for Canadian dollars only. Employee stock options, Canadian business property and interests in a Canadian personal trust or life insurance policy go on the Canadian real estate row, which keeps them out of the gain but counts them toward the T1161.

Do I have to file Form T1161 when I leave Canada?

You do if the reportable property you own just after leaving is worth more than $25,000 in total. ITA 128.1(9) requires the list, in prescribed form, by your filing-due date for the year. The CRA says to send it by that date even if you don’t otherwise have to file a return. The $25,000 test decides only whether you file the list. It has nothing to do with how much tax you owe.

Reportable property leaves out Canadian-dollar cash and deposits, registered plans and pensions, the short-term resident’s property that isn’t taxable Canadian property, and any personal-use item worth less than $10,000. Canadian real estate is not left out, so a condo you keep goes on the list even though it isn’t deemed sold.

The penalty for a late T1161 is $25 a day, with a minimum of $100 and a maximum of $2,500, per the CRA’s emigrant dispositions page. Form T1243 is the computation, Form T1161 is the list, and they’re separate forms. Filing T1161, T1243 and T1244 together walks through each one line by line.

Can I defer paying Canada’s departure tax?

Yes. You can elect on Form T1244 to postpone paying the tax on the deemed gains until you actually sell the property, and the CRA says you can make the election “regardless of the amount”. It must be made by April 30 of the year after you leave. Above a federal tax of $16,500 ($13,777.50 for former Quebec residents) you have to post security, and the deferral postpones the payment without reducing the tax.

“If you make this election and the amount of federal tax owing on income from the deemed disposition of property is more than $16,500 ( more than $13,777.50 for former residents of Quebec), you have to provide adequate security to cover the amount. You may also be required to provide security to cover any applicable provincial or territorial tax payable.” (CRA, Dispositions of property for emigrants)

The statute behind it is ITA 220(4.5), and the deadline is your balance-due day, which ITA 248(1) sets at April 30 of the following year for a living individual. That date doesn’t move to June 15 if you carried on a business and your return is due later. Separately, 220(4.51) deems the CRA to have accepted security up to the tax a Canadian-resident trust would pay on $50,000 of taxable income. The election doesn’t cover a right under an employee benefit plan.

The CRA says you then pay later, “without interest”, when you sell or otherwise dispose of the property, with payment due by April 30 of the year after that disposition. Coming back to Canada can also mean the deferred tax comes due, which the CRA hedges with “may”. How the T1244 deferral works in practice covers posting security and what ends the deferral.

Does the US give me a new cost basis after departure tax?

Not automatically. Paying Canada’s departure tax resets your Canadian cost, but your US basis stays at what you paid unless you use the treaty. Article XIII(7) of the Canada-US tax treaty lets someone Canada taxed on a deemed sale elect to be treated in the US as if they’d sold and repurchased the property at fair market value at that time.

“Where at any time an individual is treated for the purposes of taxation by a Contracting State as having alienated a property and is taxed in that State by reason thereof, the individual may elect to be treated for the purposes of taxation in the other Contracting State, in the year that includes that time and all subsequent years, as if the individual had, immediately before that time, sold and repurchased the property for an amount equal to its fair market value at that time.” (Article XIII(7), consolidated text published by Finance Canada)

The election is made on the US side, and skipping it can mean the same gain is taxed twice when you later sell. How the US basis election works covers which return carries it and when it’s due.

What to do, in order

1. Fix the date your Canadian residence ended.
2. List everything you own on that date, inside and outside Canada.
3. Sort each item with the table above: deemed sold or not, reportable or not.
4. Value the deemed-sold items and work the gains on Form T1243.
5. Decide on the T1244 deferral before April 30 of the next year.
6. File the departure-year return with the T1161, and handle the US basis election on its own clock.

If you want a sense of what professional help with this return costs before you start, what a departure-tax return costs lays it out.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.